The latest research from global measurement and data analytics expert Nielsen reveals that sales of Private Label products in South Africa now equate to R49.3bn annually and the sector commands a healthy 21.1% share of the South African retail sector, up from 20% in 2017, and ahead of branded product growth in the country. These insights stem from the 2018 Nielsen report on State of Private Label in South Africa
Private Label is defined as products that are sold exclusively by a specific retailer or chain of stores and includes store brands, which feature a retailer’s own branding and ‘confined brands’ that are exclusively manufactured for a particular retailer but do not feature their branding. Against this backdrop, Nielsen’s research on the Private Label segment covered 155 categories, within eight supergroups and across a range of leading local retail groups within South Africa.
Nielsen South Africa Retail Lead Gareth Paterson
reports; “Recent years have shown an upward trend in the Private Label category in South Africa, with improving consumer perceptions around their quality and value, driven by a greater focus from retailers to develop value for money offerings resulting in increased innovation and differentiation within this space. Private Label currently over indexes in terms of sales in perishables and dry groceries, with almost 70% of Private Label sales coming through these supergroups. Overall, however, the biggest contribution to incremental growth in Private Label is coming from perishables, with products like prepared convenience meals, chicken, and pre-packed cheese driving this growth.”Top performers
Overall the top Private Label category remains long life milk with fresh chicken in second place. One of the biggest movers has been prepared foods, which has jumped from number 12 to the third position, in line with a big move in South Africa towards convenience options and the desire to reduce food preparation times.
Sugar has also moved up from 8th to 5th position, while butter has moved from 10th to 4th on the Top Category ranking. Given the increase in prices in both sugar and butter, Private Label seems to be a more viable option for consumers in these categories.
Improved consumer perceptions about Private Label have also contributed to an increased willingness to try these products across multiple categories. “We are seeing previously smaller supergroups in Private Label like Baby Care, Personal Care and Confectionary achieving double digit growth, which is well ahead of branded product growth. This shows the trust that consumers are now showing towards Private Label products and their willingness to use them in categories that were previously reserved for trusted brand names which included categories like Diapers and Pet Food,” reports Paterson.Growth drivers
Looking at the deeper dynamics within the category and the reasons for its healthy performance, the 2018 Nielsen Shopper Trends report found that 77% of shoppers claim to compare the prices of store brands with leading manufacturer brands and the majority of consumers say they buy Private Label products because they are cheaper.
The value for money proposition of Private Label is also seen to be a major factor in its popularity, and overall, the quality of products is seen to be improving and there is an increase in the number of people recommending them.
In terms of the demographic profile of South African consumers choosing to purchase Private Label goods, 55% of sales currently come from LSM 7-10, but the growth driver in 2018 has been the middle LSMs which have contributed approximately 30% of sales. Paterson comments; “Lower LSMs have also shown that they are now willing to try Private Label within certain staple categories like maize, compared to years gone by, when trusted brands were preferred and making the switch was not an option.
This is due to the fact that lower LSMs don’t have as much access to Private Label products as the majority of their shopping trips are done within traditional trade outlets, where these types of products are not as prevalent and available for purchase. However, some retailers have expanded to previously underserved areas, bringing Private Labels to more South Africans, resulting in a shift in perception and more willingness to try Private Labels.”
Looking ahead, the expectation is that Private Label will continue to carve out a healthy share of retail sales within the next five years, off the back of good growth over the past three years, with South Africa poised to benefit from a growing middle class and urbanisation and increasing modern trade access.
“Overall, there is a clear focus from retailers to up Private Label’s share of their sales with an enhanced focus on the development of premium and niche Private Label products and enhanced labelling, all of which bodes well for the rapid evolution of this sector,” says Paterson.